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On more than one occasion during his stunning press conference on Tuesday, U.S. Attorney Patrick Fitzgerald bluntly said he has found no evidence of wrongdoing by President-elect Barack Obama in the tangled, tawdry scheme that Illinois Governor Rod Blagojevich allegedly cooked up to sell Obama's now vacant Senate seat to the highest bidder. But for politicians, it's never good news when a top-notch prosecutor has to go out of his way to distance them from a front-page scandal. And indeed, there are enough connections between the worlds of Blagojevich and Obama that the whole thing has the potential to grow beyond a colorful Chicago tale of corruption to entangle members of the presidential transition team, test Obama's carefully cultivated reformist image and distract the President-elect just as he is preparing to take office.

The Senate-seat scheme is only one of the allegations lodged against the two-term governor, whose administration has been under investigation for alleged "pay to play" patronage practices for years. The complaint claims that Blagojevich tried to extort the owners of the Tribune Company to fire editors at the Chicago Tribune and withhold $8 million of state funds for a children's hospital in hopes of extracting a $50,000 campaign contribution from one of its executives. Blagojevich, who came into office in 2002 with promises to clean up the state's culture of graft, made no comment Tuesday during a bail hearing after which he was released on his own recognizance. But late in the day, his lawyer Sheldon Sorosky told reporters the governor "is very surprised and certainly feels that he did not do anything wrong ... a lot of this is just politics." (See pictures of who will be in Obama's White House.)

In laying out the federal criminal complaint, U.S. Attorney Fitzgerald said Blagojevich went far beyond the realm of hard-knuckle politics into a "political-corruption crime spree." The central allegation is that the governor schemed to extort money and jobs for himself and his wife from the Obama transition team in exchange for naming Obama's preferred candidate (unnamed in the charges) to the open Senate seat. The complaint details Blagojevich's attempts to contact intermediaries to the transition, and in one case it shows him soliciting favors from a union official he identifies as an "emissary." All of this alleged activity was taking place, amazingly, at a time when Blagojevich had every reason to believe he was being closely monitored by the U.S. Attorney's office.

For the time being, Obama and his aides have declined to comment on the complaint. Asked about the matter at a photo op Tuesday afternoon, Obama said he was "saddened and sobered" by the news but that he had not been in contact with Blagojevich and was "not aware of what was happening." But in the coming days and weeks, the campaign will have to address whether Blagojevich or any of his representatives actually talked to an Obama adviser or emissary on the matter. The transition team will also, undoubtedly, try to distance Obama from a man whom he helped elect in 2002 and supported for re-election in 2006, as well as from a brand of corrupt Chicago politics that John McCain tried unsuccessfully to link to him during the presidential campaign.

Blagojevich appears to have started thinking about approaching the President-elect's transition team almost immediately after the election, according to the FBI complaint unsealed Tuesday in Chicago, which is based on wiretapped conversations. In a discussion with his deputy governor on Nov. 5, Blagojevich talked about getting an ambassadorship or a Cabinet position (like Secretary of Health and Human Services) in exchange for the Senate seat. The same day he said, "I've got this thing, and it's f______ golden and, uh, uh, I'm just not giving it up for f______ nothing. I'm not gonna do it."

Things don't appear to have gone well in the following days, however. On Nov. 10, Blagojevich allegedly held a conference call with his wife, close aides and a handful of Washington-based advisers in which he complained that the advisers were telling him he had to "suck it up" and give this "motherf_____ [Obama] his Senator. F___ him. For nothing? F___ him." At this point in the complaint, it's not clear whether Blagojevich, his advisers or any other representatives had actually approached the Obama transition team. Over the next two days, however, Blagojevich stepped up his efforts. On Nov. 11, Blagojevich told his chief of staff and fellow defendant in the complaint, John Harris, that he knew Obama wanted someone identified in the complaint only as "Senate Candidate 1" for the Senate seat. But, Blagojevich said, "they're not willing to give me anything except appreciation. F___ them." (See the top 10 unfortunate political one-liners.)

That did not deter the governor, apparently. The same day, Blagojevich suggested starting a nonprofit lobbying organization, known as a 501(c)(4), which he could eventually work for, and proposed getting Obama's friend "Warren Buffett or some of those guys to help us on something like that." In a separate conversation on the same day, he suggested that Obama and his associates "can get Warren Buffett and others to put $10, $12 or $15 million into the organization" and then suggested that he could retire from the governorship to go over to the organization. (See the top 10 scandals of 2008.)

Blagojevich then tried to use a union official as an intermediary to the Obama transition and "Senate Candidate 1." On Nov. 12, Blagojevich discussed the open Senate seat with an official from the Service Employees International Union (SEIU). During the conversation, Blagojevich said he understood that the SEIU official was an "emissary to discuss Senate Candidate 1's interest" in the seat, according to the complaint. Blagojevich said he would be interested in the 501(c)(4) arrangement, and the SEIU official agreed to "put that flag up and see where it goes." Late Tuesday, an SEIU spokesperson said in a statement that "we have no reason to believe that SEIU or any SEIU official was involved in any wrongdoing," though the organization wouldn't discuss any specifics of the allegations.

The following day, Blagojevich attempted yet another contact with the Obama transition team in hopes of floating the 501(c)(4) idea. He said he wanted to tell an unidentified adviser to the President-elect that he wanted money to be raised for the nonprofit. The same day, he said in a phone conversation that mentioning the nonprofit to the President-elect's adviser would be an unspoken way of raising the question of Senate Candidate 1, among others. In the same conversation, Blagojevich suggested using an unidentified individual as an intermediary to the President-elect's adviser.

As Illinois reels from the lurid revelations about its governor, the state's politicians are scrambling to figure out what to do about Obama's replacement in the Senate. Despite all the damning charges, Blagojevich still currently has the power to appoint that person. Unless he steps down or he is impeached or convicted, the state constitution gives him, and him alone, that authority. It's possible that the Senate could refuse to seat a Blagojevich appointment, but no one wants to let it go that far. By late Tuesday, it seemed likely that the state legislature would convene a special session to pass an emergency law setting up a special election for the open seat.